The chamber has also made a case for dropping the proposal to levy additional 1 per cent tax on inter-state supply of goods, as it would defeat the objective of GST.. Exclusion of real estate and petroleum (for the initial years) from the GST levy and continuing with the current taxation regime for these sectors will significantly increase the cost of doing business and drive inflation higher, the chamber said in a letter to Jaitley.

If real estate is excluded from the GST purview, it would mean that credit would not be available for the input used in construction of factories, offices, civil structures and even plant and machinery which may be considered a part of real property, being attached to land, the chamber has said.

The real estate industry was included in the Value Added Tax (VAT) net at the time of introduction of this tax.

Exclusion of real estate from GST would be a step in the reverse direction, the chamber has said. Assocham has also said that exclusion of real estate from the scope of GST would result in a major erosion of the tax base, causing distortion and denying the full economic benefits of the GST structure envisaged originally.